Jordan yearns for Chinese investment

Jordan's King Abdullah II has made seven visits to China during his reign [Getty Images]

Amman, Jordan - Just outside Jordan's southern city of Aqaba is a cluster of stores known locally as the Chinese market, which sells everything from electronics to clothes and household goods. At one store, where blankets were stacked from floor to ceiling, employee Li Jiayang gestured at the mountain of bedding. "All these products are from China," he said.

Commercial ties between Jordan and China have expanded significantly in recent years, with bilateral trade increasing sevenfold between 2001 and 2010.

But the growth has always been extremely imbalanced. In 2012, Jordan imported $1.99bn worth of goods from China - mostly garments, textiles, electronics and machinery - enough to make China Jordan's second-biggest import partner. Just $186m of Jordanian exports, the vast majority in raw materials like potash and phosphate, went to China.

This year, as Jordan seeks to strengthen its economic ties with China, the small Middle Eastern country has been making a concerted effort to remedy the imbalance by seeking Chinese investment for infrastructure and development projects.

Jordan is keen to attract Chinese investments and tourists.

- Jordanian King Abdullah II

To entice Chinese companies and investors, government officials have been very eager to brand Jordan as a country of untapped human potential and profits, and as a secure base for companies wishing to operate in an otherwise unstable Middle East. Given the region's political volatility, a base in a stable place like Jordan could help China develop an economic foothold that could later be used for political leverage.

"Jordan is keen to attract Chinese investments and tourists, and to benefit from China's expertise in industry and technology and developmental planning," Jordan's King Abdullah II told Xinhua, China's official news agency, during a September visit to China. Yue Xiaoyang, China's ambassador to Jordan, described the visit as bringing Sino-Jordanian relations "to an unprecedented new high".

Whether that relationship can be equally and mutually beneficial in the long term, however, remains to be seen.

Awni al-Rushoud, acting CEO of the Jordan Investment Board, a government agency that promotes investment in Jordan, acknowledged the vast trade deficit, noting that Chinese investment in Jordan stood at a "very limited" $800m.

These investments were concentrated in the industry and manufacturing sectors, according to a slide presentation Rushoud gave while visiting China in September with King Abdullah. But in a clear attempt to direct investment elsewhere, the presentation noted that "there is ample opportunity in infrastructure and energy projects, particularly renewable energy, which Chinese companies can profit from".

A few such projects have already been agreed upon. In September, a memorandum of understanding was signed for a $2.5bn oil shale-fired power plant to be built in part by the Shandong Electric Power Construction Corporation, a Chinese company. Two Chinese companies are also planning to design, build and operate a wind power plant in Jordan.

'Come and invest'

China is not the only country Jordan is courting for investment. After watching foreign direct investment drop by more than half from 2006 to 2011, Jordan worked hard in 2012 to attract investment from the Gulf, the United States and South Korea. It has also sought investment from Japanese companies to fund energy projects.

Jordan lacks the wealth to finance infrastructure projects on its own, according to Rushoud. And in a country where official unemployment is over 12 percent, "these investments should create jobs for Jordanians", he added, noting that Jordanian law offers tax and customs exemptions for investors.

"We said to the Chinese, 'come and invest'," Rushoud said, offering solar power as an example. Jordan has told Chinese companies that if they produce solar parts in Jordan, they "can avoid the [tax] penalties that have been imposed" on them elsewhere.

In 2010, an energy efficiency law stipulated that renewable energy should comprise 7 percent of Jordan's energy by 2015, and 10 percent by 2020. For Jordan, developing these new energy sources will require $17.5bn from 2007-2020. With few fossil fuel resources of its own, Jordan is heavily dependent today on imported oil and gas.

Solar energy is one sector where Jordanian and Chinese interests converge: Jordan needs China's expertise in solar technology to wean itself from reliance on energy imports, while China stands to profit. According to Li Jin Fu, executive director of Chinese metallurgical company Hunan Herui, Chinese investment in Jordan's solar sector could reach $2bn.

Dr Christina Lin, a senior fellow at the German Marshall Fund's Transatlantic Academy, said China's interest in Jordan's energy sector is "profit-driven" at the moment. But, she added in an email, soft power in the form of "economic carrots... over time translates into political influence".

Jordan is so keen on garnering Chinese investment, Rushoud said, because China is one of the fastest-growing economies in the world. "There's huge wealth accumulated in China," he pointed out. "The strategy of Chinese companies is shifting. They are looking for new markets - emerging markets, [and] Jordan is a country that will provide the Chinese with that."

A regional outlook

Jordan has also advertised its proximity to Syria and Iraq, both countries in need of reconstruction after years of armed conflict. By Rushoud's estimate, reconstruction will cost Syria $100bn for every year of war. "We told the Chinese companies, 'you are the early comers here. You can locate in Jordan,'" he said. "We are the gate to Syria."

They [Chinese officials] think Jordan can be an entry point into the region for Chinese companies"

- Maen Nsour, political economist

"Iraq needs lots of development, lots of commodities and services that can come from China," added Maen Nsour, a political economist who preceded Rushoud as head of the Jordan Investment Board. Nsour said, based on meetings he has held with high-level Chinese officials, "they think Jordan can be an entry point into the region for Chinese companies".

China is seeking stability and continued access to energy and resources in the region, explained Lin - and Jordan, as one of the more stable countries in its neighbourhood, is an ideal trade logistics hub into Europe and Africa.

Nsour said he saw no reason for Jordan to be wary in its rapidly ascending relations with China, noting better relations between the two countries would "contribute immensely" to the security of the area and people's livelihoods.

However, Lin warned, US allies in the Middle East such as Jordan may do well to exercise some caution over China's pivot towards the Middle East and its "pulling at the seams of US alliance relations in the region, as well as constraining Jordan's freedom of action in foreign policy decisions."